Public sector pay squeeze tightens

Most public sector workers have faced a two-year pay freeze – three years in local government – followed by the prospect of two years with increases capped at a measly 1 per cent, leaving real wages and living standards falling. Today the Chancellor announced yet another year of average increases capped at 1 per cent. And in the small print of the Budget document (p73) he sneaked in an extra year on top of that for some civil servants. Some groups of civil servants (such as the Department for Work and Pensions’ 95,000-strong workforce, including many low-paid Jobcentre staff) entered the pay freeze ahead of the rest of the public sector so would have expected to come out of the cap in 2014. But Osborne has slipped a fourth year of pay capped well below inflation for these workers into his Budget plans.

Osborne also announced that the government would seek “significant further savings through reforms to progression pay in the Spending Round.” There was less detail on this announcement in the Budget itself than in yesterday’s FT (£) or today’s Telegraph, both of which suggested the government will look to end a transparent system of progression based on experience and skills gained over time in favour of something more like performance related pay.

After the misguided attempt to go for postcode pay, yet again Ministers seem to be pushing pay policies that aren’t based on evidence. For instance, they ignore the fact that many public sector workers are at the top of their pay scales and so are not receiving any progression pay: pay experts Incomes Data Services estimate that half of NHS staff and around half of secondary school teachers are in this position.

They’re also still basing their arguments on the thoroughly discredited idea of a public sector ‘pay premium’ which ignores the different composition and characteristics of the public and private sectors, the effect of bonuses and the lack of comparators for key public roles like firefighters and midwives. The latest report from IDS for UNISON further dismantles this idea.

But a version of performance related pay is already being pushed for teachers, despite the evidence that it damages team working, reduces employee engagement and motivation and does not deliver better results. It is also notoriously difficult to measure the factors at play in ‘performance’ in a complex public service setting like health or education. It would mean time wasted on complex individual negotiations and would worsen inequalities, leading to more equal pay claims.

On jobs, there was more news in the OBR report published alongside the Budget which revises their estimate of public sector job losses. This has increased again since December’s report, with the number of jobs expected to be cut between 2010 and 2018 rising from 930,000 to 1 million in today’s report. And yet more cuts are on the way, with the announcement that the government will be seeking £11.5bn of savings in the spending review as opposed to the £10bn previously announced, with £5bn from “efficiency and administration savings”.

Written by Alice Hood

I’m Head of the TUC’s Equality and Strategy Department. Before that, I worked as TUC Director of Strategy, and as a TUC senior policy officer on public services, as well as a policy officer for the Local Government Association, for the Eur…